ECO 101 Chapter Notes - Chapter 15: Monopoly Profit, Marginal Revenue, Natural Monopoly
Document Summary
Monopoly- a firm that is the sole seller of a product without close substitutes. Fundamental cause of monopoly is barriers to entry: a monopoly remains the only seller in its market because other firms cannot enter the market and compete with it. Monopoly resources: a key resource required for production is owned by a single firm. Government regulation: the government gives a single firm the exclusive right to produce some goods or service. Production process: a single firm can produce output at a lower cost than can a larger number of firms. The simplest way for a monopoly to arise is for a single firm to own a key resource. The monopolist has much greater power than any sing. Although exclusive ownership of a key resource is a potential cause of monopoly, in practice monopolies rarely arise for this reason. Sometimes the monopoly arises from the sheer political clout of the would-be monopolist.
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